Aug 26, 2022
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Europeans will winter with turbines, but without gas

In the photo: a turbine for the Nord Stream gas pipeline.

In the photo: a turbine for the Nord Stream gas pipeline. (Photo: Bernd Thissen/dpa/TASS)

Canada plans to transfer the remaining five repaired turbines for the Nord Stream gas pipeline to Germany, the Canadian Foreign Minister said Melanie Jolie. She explained that this was necessary in order not to give any reason to “the President of Russia Vladimir Putin continue to use its energy flows to Europe as a means of pressure.” In total, six Siemens turbines were undergoing repairs, one of which the Canadians had already sent to Germany, but Gazprom refused to accept it, citing sanctions.

At the same time, Gazprom, in response to Joly’s words, stated that at present none of the turbines of the Portovaya compressor station is being repaired in Canada. It is not entirely clear what they meant in the Russian company – that the turbines have already been transferred to Germany, or that Gazprom does not recognize the repair of this equipment at all due to “the current situation does not comply with the current contractual obligations on the part of Siemens”, as was the case with the first turbine .

The Canadian government granted permission to ship the six turbines, which were undergoing maintenance in Montreal, to Germany for onward transfer to Gazprom back in July, as Berlin asked for it. In Ukraine, they were dissatisfied with such a step, and the president Vladimir Zelensky said the Kremlin would view the move as a sign of “weakness”. But the German Chancellor Olaf Scholz promised to ensure the return of the remaining five turbines in order to prevent “the Russian game from working.”

Recall that since mid-June, Gazprom has reduced supplies via Nord Stream to Europe to 33 million cubic meters of gas per day (the planned volume is 167 million cubic meters) due to problems with Siemens turbines, which were being repaired in Montreal. At first, Canada refused to transfer turbines for a long time due to sanctions, and then, when one unit nevertheless arrived in Germany, Gazprom did not accept it, since it was supposed to be delivered to Russia under the contract. Despite this, Germany managed to fill underground gas storage facilities by 80% ahead of schedule, and this work will continue. At the same time, gas prices on the EU spot market on August 25 rose above $3,200 per thousand cubic meters for the first time since March.

Deputy Chief Director for Energy at the Institute of Energy and Finance (IEF) Aleksey Belogoryev believes that there may be backup turbines for Gazprom in Canada, which explains the company’s statements. But in any case, Gazprom will not accept them until it receives guarantees that these supplies will be lifted from sanctions, which is unlikely. And although now the Europeans continue to fill their storage facilities, after the start of the heating season, the decline in Russian gas supplies may turn out to be critical.

– They know exactly what is happening with the turbines, only in Gazprom and Siemens. Obviously, for the rest of this issue there is confusion. Previously, Gazprom announced information about the eight turbines provided for by the Nord Stream project, even called their numbers. It is known that now one of them works. Another one is stuck in Germany, three should be at the Portovaya compressor station awaiting the arrival of Siemens specialists, two more are waiting for the technical supervision decision that their operation is possible. Accordingly, only one turbine was reported by Gazprom back in April that it was ready to ship it for scheduled repairs. Whether she was sent to Montreal or not, we do not know for sure.

Based on indirect data, five turbines should be located at the Portovaya compressor station. At the same time, in theory, any compressor station should have some kind of reserve capacity, including turbines. It is possible that in Canada there are exactly such standby turbines that Siemens provided to Gazprom for the period of scheduled overhaul. If this is so, then both sides are right – Gazprom, which says that it did not send turbines to Canada, and Siemens, which provides equipment to replace the one that needs to be repaired. Although this is just my guess.

SP: Can Gazprom still accept these turbines?

— Gazprom has an unambiguous position — it will not accept any turbines from Canada or through the mediation of any other country until it receives written guarantees that these deliveries will be lifted from sanctions. Therefore, now the only thing that can be hoped for in terms of increasing pumping is carrying out repair work directly at the compressor station, which would eliminate a number of malfunctions.

Although it is not known whether the turbines available there can be repaired directly at the station or if they also need to be sent to Montreal. Gazprom does not comment on this in its statements, as does Siemens, although it could shed light on the situation. But all the statements from the German company that we have been hearing since spring are extremely general.

So far, everything looks so that Gazprom will not accept turbines from abroad, and we do not know what is happening with the repair at the compressor station itself, since official bodies do not comment on this topic.

“SP”: – How critical is it for Germany to “Nord Stream” to work at full capacity? After all, even without this, they have almost filled their UGS?

– The growth of spot prices above three thousand dollars per thousand cubic meters in itself shows how critical and important this is. If such prices are in the summer, when they should be seasonally low, this indicates that the mood among market participants is panicky. In the spot gas market, unlike the oil market, there is very little speculative capital. It mainly involves companies directly related to the gas industry. And, judging by the prices, they are now panicking, regardless of how much gas is now pumped into the UGS.

It is clear that the injection is proceeding at a fairly vigorous pace, including in Germany, which may come up with 90% by the beginning of the heating period. But everyone understands that this does not save the situation, although it plays an important role. If low supplies from Gazprom continue or even decrease even more, it will be very difficult for Europeans to get through the heating period without a serious reduction in demand.

In addition to Russian gas, much will depend on how sustainable the supply of liquefied gas will be on the European market. Whether Europeans will be able to compete with Asian consumers remains an open question that analysts around the world are now thinking about. If the reduction in supplies from Russia is accompanied by a reduction in the supply of LNG, this will create critical risks for Europe to pass the heating season. Especially if the temperature regime is lower than last winter.

So far, the temperature forecast for the fourth quarter of this year for Europe is optimistic, but no one knows what will happen in January-February, when consumption peaks, and this adds to the nervousness of the market.

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